Q2 2025 Cleveland-Cliffs Inc Earnings Call

July 21, 2025

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Operator 1: Good morning, ladies and gentlemen. My name is Rob, and I'm your conference facilitator today. I would like to welcome everyone to the Cleveland-Cliffs Q2 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question-and-answer session. The company reminds you that certain comments made on today's call will include predictive statements that are intended to be made as forward-looking with the Safe Harbor Protections of the Private Securities Litigation Reform Act of 1995. Although the company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could also cause actual results to differ materially.

Operator: Good morning, ladies and gentlemen. My name is Rob, and I'm your conference facilitator today. I would like to welcome everyone to the Cleveland-Cliffs Q2 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question-and-answer session. The company reminds you that certain comments made on today's call will include predictive statements that are intended to be made as forward-looking with the Safe Harbor Protections of the Private Securities Litigation Reform Act of 1995. Although the company believes that its forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could also cause actual results to differ materially.

Rob: Good morning, ladies and gentlemen. My name is Rob and I'm your conference facilitator. Today.

Rob: I would like to welcome everyone to the Cleveland Cliffs second quarter 2025 earnings conference call.

All eyes have been placed on mute prevent any background noise.

Rob: After this speaker, remarks will be a question and answer session.

Speaker Change: The company reminds you of certain comments made on cities. Call will include predictive statements that are intended to be made as forward-looking with the Safe Harbor protections of the private Securities. Litigation Reform, Act of 1995.

Rob: Although the company believes that its forward-looking statements are based on reasonable assumptions.

Operator 1: Important factors that could cause results to differ materially are set forth in reports on Forms 10-K and 10-Q, and news releases filed with the SEC, which are available on the company's website. Today's conference call is also available and being broadcast at clevelandcliffs.com. At the conclusion of the call, it'll be archived on the website and available for replay. The company will also discuss results excluding certain special items. Reconciliation for Regulation G purposes can be found in the earnings release, which was published this morning. At this time, I would like to introduce Lourenco Goncalves, Chairman, President, and Chief Executive Officer.

Operator: Important factors that could cause results to differ materially are set forth in reports on Forms 10-K and 10-Q, and news releases filed with the SEC, which are available on the company's website. Today's conference call is also available and being broadcast at clevelandcliffs.com. At the conclusion of the call, it'll be archived on the website and available for replay. The company will also discuss results excluding certain special items. Reconciliation for Regulation G purposes can be found in the earnings release, which was published this morning. At this time, I would like to introduce Lourenco Goncalves, Chairman, President, and Chief Executive Officer.

Rob: Such as statement, such statements are subject to risks and uncertainties that could also cause actual results to differ materially.

Rob: Important factors that could cause results of different materially are set forth in reports on forms 10K, and 10 q and news releases filed with the SEC, which are available on the company's website.

Today's conference call is also available and being broadcast at Cleveland cliffs.com.

Rob: At the conclusion of the call, it will be archived on the website and available for replay.

The company will will also discuss results. Excluding certain special items.

Rob: Reconciliation for regulation. G purposes can be found in the earnings release, which was published this morning.

Rob: At this time, I would like to introduce Lorenzo consulus chairman president and chief executive officer.

Lourenco Goncalves: Thank you, Rob, and good morning, everyone. Our adjusted EBITDA in Q2 showed an improvement of $271 million from the prior quarter. We achieved higher shipment volume targets, and as a result, we improved our operational efficiency and lowered our production costs. Our recently announced footprint optimization initiatives are underway as planned, and you'll see their impact in the second half of this year. We are laser-focused on cost-cutting and steel sales, and that's the way we'll continue to execute going forward. Section 232 steel tariffs, implemented on 12 March at a level of 25% and increased to 50% on 4 June, have played a significant role in supporting the domestic steel industry. Foreigners competing unfairly will do whatever they can to get into our great American domestic market. They pay their workers a lot less than we pay our American workers.

Lorenzo Consulus: Thank you, Rob, and good morning everyone.

Lorenzo Consulus: Our adjustability dying Q2 shows an improvement of 271 million from the prior quarter.

Lorenzo Consulus: We achieved higher shipment volume targets. And as a result, we improved our operational efficiency.

Lorenzo Consulus: And lowered our production costs.

Lorenzo Consulus: Our recently announced footprint, optimization initiatives are underway as planned.

And we will see their impact in the second half of this year.

Lorenzo Consulus: We are laser focused on.

Lorenzo Consulus: Was cutting.

And stew sales.

And that's the way we will continue to execute going forward.

Lorenzo Consulus: Section, 232 is still tariffs.

Lorenzo Consulus: Implemented on March 12th at the level of 25%.

And increased to 50% on June, 4th.

Lorenzo Consulus: Have played a significant role in supporting the domestic steel industry.

Lorenzo Consulus: Foreigners competing unfairly will do whatever they can to get into our Great American domestic Market.

Lourenco Goncalves: They receive direct subsidies from their governments, and they do not have to comply with the stringent environmental standards and laws we have in place in the United States. So far, there's no indication that the Section 232 Tariffs will be used as a bargaining chip by the Trump administration as leverage in trade deals with other countries. We appreciate that and fully expect that the administration will keep in place and enforce these Section 232 Tariffs. If the United States really wants to continue to have a strong domestic steel industry, proper enforcement of the Section 232 Tariffs is absolutely necessary, with no exceptions or exemptions allowed. The import data that has been published thus far makes it very clear that the 232 Tariffs are having a positive impact, not just on steel but also on the automotive sector.

Lorenzo Consulus: They paid their workers a lot less than we pay our American workers.

They received direct subsidies from their governments.

Lorenzo Consulus: And they do not have to comply with the stringent environmental, standards and laws. We have in place in the United States.

So far, there's no indication that the section 232 tariffs.

Lorenzo Consulus: Will be used as a bargaining chip.

By the Trump Administration as leverage in 3 deals with other countries.

Lorenzo Consulus: We appreciate that and fully expect that the administration will keep in place and enforce.

This section, 232 tariffs.

If the United States really wants to continue to have a strong domestic stew industry,

Lorenzo Consulus: Proper enforcement of the section, 232 tariffs is absolutely necessary with no exceptions or exemptions allowed.

Lourenco Goncalves: Both flat-rolled steel imports and light vehicle imports hit multi-year lows in April. The Trump administration has prioritized two sectors, steel and automotive, that are critical to the strength of our economy, to the resilience of our supply chains, and to the United States' national security. Cleveland-Cliffs sits right there at the intersection of both sectors, steel and automotive. The place where imported steel remains a huge problem is Canada. We understand why the US has a 50% tariff on imported steel from Canada, and that's fine. We are keeping all Stelco steel in Canada, and we are doing that by design since we acquired Stelco in November of last year and not now as a result of the tariffs implemented in 2025. It's well known that the United States is a net importer of steel.

The import data that has been published thus far, makes it very clear that the 2 3 2, tariffs are having a positive impact, not just on steel but also on the automotive sector.

Lorenzo Consulus: Both flat, roll. The steel Imports and light vehicle Imports.

Lorenzo Consulus: Hit multi-year lows in April.

Lorenzo Consulus: The Trump Administration has prioritized 2. Sectors is due and Automotive.

That are critical to the strengths of our economy to the resilience of our supply chains and to United States national security.

Lorenzo Consulus: Cliffs.

Lorenzo Consulus: Sits right there. At the intersection of both. Sectors is still an automotive.

The place where imported steel remains a huge problem is Canada.

Lorenzo Consulus: We understand why the US has a 50% tariff on imported steel from Canada and that's fine.

We are keeping all stelco is still in Canada.

Lorenzo Consulus: And we are doing that by Design.

since we acquired the stelco in November of last year and not now, as a result of the tariffs implemented in 2025,

Lourenco Goncalves: What's not as well known is that Canada is also a net importer of steel. So, just like the US used to be prior to President Trump, Canada is still being taken advantage of by all foreign producers, friends and foes, all dumping steel into the Canadian market, friends and foes. The Canadian government's latest attempt to stop unfair trade is insufficient. It only covers 70% of steel imports into Canada. Because of the insistence on allowing free trade agreement countries, the so-called FTA friends, to continue to use Canada as their outlet for overproduction, our message is very clear and easy to understand. If Prime Minister Carney and his cabinet really want to have a steel industry in Canada, they should put in place significant trade protections. Then they will have a strong domestic steel industry in Canada able to support a vibrant domestic Canadian market.

Lorenzo Consulus: it's well known that the United States is a net importer of Steel.

Speaker Change: What's not as well. Known is that Canada is also a net importer of Steel.

Speaker Change: So, just like the US used to be prior to president Trump.

Canada is still being taken advantage of by All Foreign producers friends and false.

Speaker Change: All dumping steel into the Canadian Market friends, and folks.

Speaker Change: The Canadian government latest attempt to stop unfair trade is insufficiently.

Speaker Change: It only covers 70% is still Imports into Canada.

Because of the insistence on allowing Free Trade Agreement, countries, the so-called FDA France to continue to use Canada as their outlet for over production.

Speaker Change: Our message is very clear and easy to understand.

Speaker Change: If prime minister Kearney and his cabinet really want to have a steel industry in Canada, they should put in place.

Significant trade protections.

Lourenco Goncalves: We are doing just that here in the United States, and it's working. Strategic protection leads to reinvestment, full employment, and long-term viability. Our Canadian employees need more action, real action, from Prime Minister Carney. Now, on the top of automotive, the most relevant issue to be attacked and resolved is enhancing the consumer's ability to finance the purchase of a vehicle. Despite no signs of tariffs reigniting inflation, the Federal Reserve continues to keep interest rates unnecessarily high. After making home buying unattractive with very expensive mortgages, the Fed's inaction on cutting interest rates is now an impediment to car buyers. Once Chairman Jerome Powell is gone, and that's now a matter of when, not if, and as soon as interest rates come down by 50 or 75 basis points, the automotive sector will take off again. Demand is there, but this Fed chairman will not act.

Speaker Change: Then they will have a strong domestic stew industry in Canada, able to support a vibrant, domestic Canadian markets.

Speaker Change: We are doing just that here in the United States and it's working.

Speaker Change: Its strategic protection leads to reinvestment Full Employment and long-term viability.

Speaker Change: Our Canadian employees need more action. Real action, from prime minister Kearney

Speaker Change: now, on the top of automotive,

the most relevant issue to be attacked in resolved is enhancing the consumer's ability to finance the purchase of a vehicle.

Speaker Change: Despite no signs of tariffs reigniting inflation.

Speaker Change: The Federal Reserve continues to keep interest, interest rates unnecessarily High.

After making home buying unattractive, with very expensive mortgages.

Speaker Change: The feds in action on cutting interest rates is now an impediment to car buyers.

Speaker Change: and that's not a matter of when not if

Speaker Change: and as soon as interest rates come down by 50 or 75 basis points,

the automotive sector will take off again.

Demand is there.

Lourenco Goncalves: So we need a new Fed chairman appointed as soon as possible. At Cleveland-Cliffs, even with the growth we have been seeing in our tonnage delivered to the sector, we still have underutilized automotive steel capacity. With the OEMs continuing to bring back production to the United States and with consumer-friendly interest rates, the automotive sector will thrive. Cliffs is ready for that. We can ramp up quickly, and our capabilities, quality, and customer service are well known by all OEMs. Cliffs is in a unique position to support the upcoming resurgence in American vehicle production right now, not in three or five years. Other relevant news in trade enforcement is the very important 50% tariff that will go into place on Brazilian pig iron starting 1 August. Cleveland-Cliffs does not rely on imported pig iron at all.

Speaker Change: But this fed chairman will not act.

Speaker Change: So we we need a new fed chairman appointed as soon as possible.

Speaker Change: At Cleveland Cliffs.

Speaker Change: Even with the growth we have been seeing in our tonnage delivered to the sector. We still have underutilized Automotive is 2 capacity.

Speaker Change: With the oems, continuing to bring back production to the United States.

And with consumer friendly, interest rates, the automotive sector will thrive.

Speaker Change: Cliffs is ready for that.

Speaker Change: We can ramp up quickly and our capabilities quality and customer service are well known by all oems.

Speaker Change: Glyphs is in a unique position to support the upcoming Resurgence. In American vehicle production right now, not in 3 or 5 years.

Speaker Change: Other relevant news in trading enforcement is the very important 50% tariff that will go into place on Brazilian. Pig arrow is starting August 1st.

Lourenco Goncalves: We have our own hot-briquetted iron facility in Toledo, Ohio, but several of our EAF competitors do rely on imported pig iron. We are vertically integrated, and we use American iron ore, American coal, and American natural gas as feedstock, all produced right here in the United States of America, employing American workers. There's no justification to exempt imported pig iron from tariffs, as it's just to create an artificial cost advantage to benefit some players to the detriment of others. That would be equivalent to allowing imported steel into our market just because dumped steel is cheaper than domestically produced steel, or allowing for imported cars made in China to be dumped into the United States just because Chinese cars are cheaper. Cliffs' vertically integrated business model differentiates us from the rest of the industry by being completely independent from imported feedstock.

Speaker Change: Equivalent Cliffs does not rely on imported big Arrow at all. We have our own

Speaker Change: Hot briquetted iron facility in Toledo Ohio?

Speaker Change: But several of our eaf, competitors, do rely on important. Big R.

Speaker Change: We are vertically integrated.

Speaker Change: And we use American Iron War and the American code and American natural gas as fed stock.

All produced right here in the United States of America. Employing American workers.

Speaker Change: There is no justification to exempt. Imported, Big Iron, front, tariffs.

Speaker Change: As it is just to create an artificial cost advantage to benefit some players to the death rent of others.

That would be equivalent to allowing important steel into our Market just because dump is still cheaper than domestic produces Steel.

Speaker Change: For allowing for important cars made in China, to be dumped into the United States, just because Chinese cars are cheaper.

Speaker Change: Glyphs vertical integrated business model. Differentiates us.

Lourenco Goncalves: The EAF minimills, rightfully so, do not support any exemptions for imported steel, and as a matter of coherence, they should not ask for exempting from tariffs imported pig iron from Brazil or from any other country. In Q2, we also had some exciting news for our stainless steel business. Our smaller but consistently profitable stainless business is one of our best-kept secrets. During the quarter, we completely commissioned a $150 million investment in our bright annealing line at our Coshocton Works plant in Ohio. Bright annealed stainless is a premium stainless steel product for high-end automotive and critical appliance applications. If you think about the bright frame surrounding a car window or the inner drum of a washer and dryer, that's what we make there.

From the rest of the industry by being completely independent from important feed stock.

Speaker Change: The eaf mini Muse, rightfully, so do not support any exemptions for imported Steel.

And as a matter of coherence, they should not ask for exempting. Front tears, important pig iron from Brazil or from any other country.

Speaker Change: In Q2, we also had some exciting news for our stainless steel business.

Speaker Change: Our smaller, but consistently profitable is stainless. Business, is 1 of our best kept secrets,

During the quarter, we completely and commissioned a 150 million dollar investment in our bright and healing line at our Coshocton Works. Plant in Ohio.

Speaker Change: Brighton. New stainless is a premium stainless steel product for high-end automotive and critical appliances application.

Lourenco Goncalves: With this investment, which should generate a quick return on invested capital, we are dramatically improving the quality and productivity of this critical product that our customers rely upon Cleveland-Cliffs for. Finally, let me briefly touch on the shifting competitive landscape in the domestic steel market. The United States remains the most desirable market for steel. Nippon Steel's entry into our market and their astonishingly high investment promises highlight the strength and appeal of the opportunities here. Nippon's nearly $29 billion total investment proves something we have said all along: fully integrated mining, pelletizing, blast furnace, BOF production is necessary, particularly in a country like the United States that already has more than 70% EAF-based steelmaking.

Speaker Change: if you think about the bright dream surrounding a car window or the inner drum of a washer and dryer, that's what we make their

Speaker Change: with this investment which should generate a quick return on invested Capital, we are dramatically improving the quality and productivity of this critical products that our customers rely upon Cleveland Cliffs for

The United States Remains the most desirable market for steel.

Speaker Change: Nippon steals entry into our Market.

And their astonishing, High investment promises highlight, the strengths in the Pew of the opportunities here.

Speaker Change: Nippon's nearly 29 billion dollars total investment.

Proves something we have said all along.

Fully integrated mining pitizion.

Speaker Change: Particularly in a country like the United States that already has more than 70%.

Lourenco Goncalves: If that was not the case, Nippon Steel would have just built a big number of new EAF minimills in the United States for a much lesser investment and would not have purchased a primarily integrated steelmaker. They see the value in blast furnaces just as we at Cleveland-Cliffs do. Through their recently acquired and now third-tier subsidiary, U.S. Steel, Tokyo-based Nippon Steel is now an active participant within the American market. This is a fact, and the fact creates a new level of optionality for other market participants, Cleveland-Cliffs included. Among several possible outcomes, foreign investment in Cleveland-Cliffs becomes an attractive opportunity for other foreign entities, particularly due to our unique position as a major supplier to the automotive sector and of electrical steels. With that, I will turn it over to Celso. Thank you. Q2 results were largely driven by better realized pricing, cost reductions, and record shipments.

Speaker Change: E a f based is still making.

Speaker Change: If that was not the case, Nippon steel would have just built a big number of new eaf. Mini Muses in the United States for a much lesser investment and would not have purchased a primarily integrated steel maker.

Speaker Change: they see the value in Blast furnaces just as we at Cleveland Clips, do

Through their recently acquired and now third, tier subsidiary.

Speaker Change: Us steel docu based Nippon. Steel is now an active participant within the American Market.

This is a fact.

And the fact creates a new level of optionality for other Market. Participants Cleveland Cliffs included.

Speaker Change: Among several possible outcomes for an investment in Cliffs.

Becomes an attractive opportunity for other foreign entities, particularly due to our unique position as a major supplier to the automotive sector and of Electric electrical steals.

Celso Goncalves: Thank you. Q2 results were largely driven by better realized pricing, cost reductions, and record shipments.

With that. I will turn it over to salsa.

salsa: Thank you.

Lourenco Goncalves: Volumes of 4.3 million tons represented a 150,000-ton increase from the prior quarter and allowed us to run our mills more efficiently. We had previously expected a slight unit cost increase quarter-over-quarter, but with the solid operating performance, we actually recorded a $15 per ton unit cost decrease. Average selling price of $1,015 per ton represented a $35 per ton increase from the prior quarter, driven primarily by higher index pricing and partially offset by lower slab and plate pricing. Delco pricing was relatively flat. After the ArcelorMittal slab agreement expires in December, assuming today's pricing and demand environment, we should get another $125 million per quarter in EBITDA boost. From a cash flow perspective, inventory reductions, particularly in raw materials like iron ore and coke, served as a meaningful source of cash in Q2.

Celso Goncalves: Volumes of 4.3 million tons represented a 150,000-ton increase from the prior quarter and allowed us to run our mills more efficiently. We had previously expected a slight unit cost increase quarter-over-quarter, but with the solid operating performance, we actually recorded a $15 per ton unit cost decrease. Average selling price of $1,015 per ton represented a $35 per ton increase from the prior quarter, driven primarily by higher index pricing and partially offset by lower slab and plate pricing. Delco pricing was relatively flat. After the ArcelorMittal slab agreement expires in December, assuming today's pricing and demand environment, we should get another $125 million per quarter in EBITDA boost. From a cash flow perspective, inventory reductions, particularly in raw materials like iron ore and coke, served as a meaningful source of cash in Q2.

Speaker Change: Due to results were largely driven by better realized pricing cost reductions and record shipments.

Speaker Change: Volumes of 4.3 million tons represented, a 150,000 tonne increase from the prior quarter and allowed us to run our Mills more efficiently.

Speaker Change: We had previously expected a slight unit cost. Increase quarter over quarter.

Speaker Change: But with the solid operating performance, we actually recorded a 15- turn unit cost decrease.

Speaker Change: Average selling price of 1,015 per ton represented a 305 per tonne increase from the prior quarter.

Driven primarily by higher index pricing and partially offset by lower slab and plate pricing.

Speaker Change: Delco pricing was relatively flat.

Speaker Change: After the arcelor slab agreement, expires in December, assuming today's pricing and demand environment, we should get another 125 million per quarter in ebita boost.

Lourenco Goncalves: The acquisition of Stelco came with the benefit of being able to use excess coke production out of Hamilton in our US mills. Stelco's pricing has been hampered by the excessive imported steel penetration in Canada, but the value of being able to use Hamilton coke has been the biggest driver of us reaching our cost synergy target. As a result, we were able to let one of our third-party coke supply contracts expire on 30 June, reducing our need to purchase coke externally. We have another coke contract expiring at the end of this year that we will no longer need either. Our ability to source more coke internally, in and of itself, has already made Stelco a valuable contributor for the combined company, and this will be further bolstered once the next coke contract expires.

Celso Goncalves: The acquisition of Stelco came with the benefit of being able to use excess coke production out of Hamilton in our US mills. Stelco's pricing has been hampered by the excessive imported steel penetration in Canada, but the value of being able to use Hamilton coke has been the biggest driver of us reaching our cost synergy target. As a result, we were able to let one of our third-party coke supply contracts expire on 30 June, reducing our need to purchase coke externally. We have another coke contract expiring at the end of this year that we will no longer need either. Our ability to source more coke internally, in and of itself, has already made Stelco a valuable contributor for the combined company, and this will be further bolstered once the next coke contract expires.

Speaker Change: From a cash flow perspective, inventory reductions particularly in raw materials like iron ore and Coke served as a meaningful source of cash and Q2.

the acquisition of stelco came with the benefit of being able to use excess Coke production out of Hamilton, in our us Mills,

Delta's pricing has been hampered by the excessive imported steel penetration in Canada but the value of being able to use Hamilton Coke. Has been the biggest driver of us reaching our cost Synergy Target.

Speaker Change: As a result, we were able to let 1 of our third-party cook Supply, contracts expire on June 30th.

Speaker Change: Reducing our need to purchase Coke externally.

Speaker Change: We have another Coke contract expiring at the end of this year, that we will no longer need either.

Our ability to Source more coke internally in and of itself has already made stelco a valuable contributor for the combined company.

Lourenco Goncalves: On top of that, based on current market dynamics, we expect even lower coal prices for 2026. Our balance sheet remains well positioned as a result of Q2 and future working capital reductions. We ended the quarter with $2.7 billion of liquidity and no near-term maturities. Net debt remains manageable and is soon to be on a downward trajectory. Our capital allocations priorities remain clear: use excess free cash flow to pay down debt and reach our leverage target. This is the history of my nine years at Cliffs. We lever up to make necessary acquisitions, and we use the resulting free cash flow to pay down debt quickly. Potential non-core asset sales could also accelerate debt reduction. We have now engaged JPMorgan as our advisor and launched sell-side processes to explore the potential sale of certain non-core operating assets.

Celso Goncalves: On top of that, based on current market dynamics, we expect even lower coal prices for 2026. Our balance sheet remains well positioned as a result of Q2 and future working capital reductions. We ended the quarter with $2.7 billion of liquidity and no near-term maturities. Net debt remains manageable and is soon to be on a downward trajectory. Our capital allocations priorities remain clear: use excess free cash flow to pay down debt and reach our leverage target. This is the history of my nine years at Cliffs. We lever up to make necessary acquisitions, and we use the resulting free cash flow to pay down debt quickly. Potential non-core asset sales could also accelerate debt reduction. We have now engaged JPMorgan as our advisor and launched sell-side processes to explore the potential sale of certain non-core operating assets.

Speaker Change: And this will be further bolstered once the next Co contracts expires.

Speaker Change: On top of that based on current market dynamics, we expect even lower coal prices for 2026.

Our balance sheet remains well positioned, as a result of Q2 and future working, capital, reductions.

Speaker Change: We ended the quarter with 2.7 billion dollars of liquidity and no near-term maturities.

Speaker Change: Our Capital allocations priorities remain. Clear, use excess free cash flow to pay down debt and reach our leverage Target.

This is the history of my 9 years at cliffs.

Speaker Change: We lever up to make necessary Acquisitions and we use the resulting free. Cash flow to pay down debt quickly.

potential non-core, asset sales could also accelerate debt reduction

Lourenco Goncalves: These selected assets could represent billions of dollars of value, and we will only sell these assets if the sum of the parts' valuation unlocks trapped value for Cleveland-Cliffs shareholders. In addition to these non-core operating assets, we are also receiving inbound interest in some of our recently idled facilities, which could also sell for cash. These sites, particularly Riverdale, Steelton, and Conshohocken, are all uniquely positioned geographically and have what data center developers are looking for: access to power and water with the infrastructure already in place. While these properties are idled, if opportunities don't arise that justify restarting, they have good value, and the amount of interest we have received in these properties so far is reflective of this. If we're successful in executing any sales, the cash proceeds will go directly to debt reduction.

Celso Goncalves: These selected assets could represent billions of dollars of value, and we will only sell these assets if the sum of the parts' valuation unlocks trapped value for Cleveland-Cliffs shareholders. In addition to these non-core operating assets, we are also receiving inbound interest in some of our recently idled facilities, which could also sell for cash. These sites, particularly Riverdale, Steelton, and Conshohocken, are all uniquely positioned geographically and have what data center developers are looking for: access to power and water with the infrastructure already in place. While these properties are idled, if opportunities don't arise that justify restarting, they have good value, and the amount of interest we have received in these properties so far is reflective of this. If we're successful in executing any sales, the cash proceeds will go directly to debt reduction.

we have now engaged JP Morgan as our adviser and launched sell-side processes to explore the potential sales of certain non-core operating assets,

these selected assets could represent billions of dollars of value.

And we were only sell these assets. If the sum of the parts valuation unlocks trapped value for Cleveland Cliff shareholders,

Speaker Change: In the addition to these non-core operating assets, we are also receiving inbound interest in some of our recently, idled facilities.

Which, which could also sell for cash.

Speaker Change: These sites, particularly Riverdale, Steelton and Contra Hawken, are all uniquely positioned geographically and have what data center developers are looking for access to power and water with the infrastructure already in place.

Speaker Change: While these properties are idled, if opportunities don't arise that justify restarting, they have good value. And the amount of Interest we have received in these prop properties. So far is reflective of this

If we're successful in executing any sales, the cash proceeds will go directly to debt reduction.

Lourenco Goncalves: We also took actions during the quarter to lower both our SG&A run rate and capital expenditure budget. Our full-year 2025 expectations for these items were reduced by a combined $50 million. These were proactive, surgical reductions based on our newly tightened footprint. Our overhead structure is now leaner, and we're getting more out of every dollar we spend. Our steel unit cost reduction target of $50 per ton remains firmly on track. This cost reduction pace, combined with healthy HRC pricing, is expected to support growing EBITDA generation in the coming quarters. Operational discipline, capital prudence, and free cash flow generation remain our top financial priorities. We're confident that these principles will continue to guide us to even better results in the coming quarters. With that, I'll turn it over to Lourenco for his closing remarks. Thanks, Celso.

Celso Goncalves: We also took actions during the quarter to lower both our SG&A run rate and capital expenditure budget. Our full-year 2025 expectations for these items were reduced by a combined $50 million. These were proactive, surgical reductions based on our newly tightened footprint. Our overhead structure is now leaner, and we're getting more out of every dollar we spend. Our steel unit cost reduction target of $50 per ton remains firmly on track. This cost reduction pace, combined with healthy HRC pricing, is expected to support growing EBITDA generation in the coming quarters. Operational discipline, capital prudence, and free cash flow generation remain our top financial priorities. We're confident that these principles will continue to guide us to even better results in the coming quarters. With that, I'll turn it over to Lourenco for his closing remarks. Thanks, Celso.

Speaker Change: We also took actions during the quarter to lower both our sgna run rate and capital expenditure budget.

Speaker Change: Our full year 2025 expectations for these items were reduced by a combined 50 million.

Speaker Change: These were proactive surgical reductions based on our newly tightened footprint.

Speaker Change: Our overhead structure is now leaner and we're getting more out of every dollar we spend.

Speaker Change: Our steel unit cost reduction Target of $50 per ton, remains firmly on track.

Speaker Change: This cost reduction, Pace combined with healthy, HRC pricing is expected to support growing ebita generation in the coming quarters.

Operational discipline, Capital, prudence and free cash flow generation. Remain our top Financial priorities.

Speaker Change: We're confident that these principles will continue to guide us to even better results in the coming quarters.

With that, I'll turn it over to Lorenzo for his closing remarks.

Lourenco Goncalves: We showed strong improvements in pricing, costs, and sales volumes in Q2. Going forward, the macro trends are aligning in our favor. With that, the second half of 2025 is shaping up to be much better than the first half. I'll now turn it back to Rob for Q&A.

Lorenzo Consulus: Thanks. Also, we showed the strong improvements in pricing costs and sales volumes in Q2.

Going forward. The macro Trends are aligning in our favor.

Lorenzo Consulus: With that the second half of 2025 is shaping up to be much better than the first half.

Rob: I will now turn it back to Rob for Q&A.

Operator 2: Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Once again, that is star one. Thank you. Thank you. Our first question comes from the line of Nick Giles with B. Riley Securities. Please receive your questions.

Operator: Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Once again, that is star one. Thank you. Thank you. Our first question comes from the line of Nick Giles with B. Riley Securities. Please receive your questions.

Rob: Thank you at this time, we'll be conducting a question and answer session.

Speaker Change: If you like to ask a question, please press star 1 from your telephone keypad and the confirmation tone. Indicate. Your line is in the question queue.

Rob: you may press star 2 if you would like to remove your question from the Keough,

Rob: For positions, using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

1 moment, please while we pull for questions once again, at Star 1, thank you.

Speaker Change: Thank you. Uh, first question comes from the line of Nick Giles with B Riley Securities. Please receive your questions.

Nick Giles: Thank you, operator. Good morning, Lourenco and Celso. Good to see the cost reductions come through in Q2, and so just was wondering how should we think about cadence of cost reductions from here? How much of a sequential change could we ultimately see in Q3? And then was curious, just wanted to get your thoughts on working capital considerations. Thank you very much.

Thank you, operator. Uh good morning, learns. And so so uh good to see the cost reductions come through in 2 q and so just was wondering how

Should we think about Cadence of cost reductions from here? How much of a sequential change? Could we ultimately see in in 3Q and then was, uh, Curious just wanted to get your thoughts on working capital. Considerations. Thank you very much.

Celso Goncalves: Yeah, sure. Hey, Nick. Good morning. Happy to provide some general guidance for Q3. For Q2, quarter-over-quarter, costs were down $15 a ton versus our expectations to be up $5 per ton, so we're happy to get the cost reduction going here in this quarter. Looking ahead to next quarter, we expect costs to be down another, call it, $20 per ton from Q2 to Q3 with even further reductions in cost in Q4. Q3 costs, we're originally expected to be down more than $20 per ton, but some of the cost reductions were pulled forward into Q2, a trade-off that we're happy to take. The asset optimization initiatives that we've been talking about are in motion, and you can see that here already with the Q2 reductions. And we expect Q3 to also benefit from similar shipment levels as Q2.

Yeah sure. Hey Nick, good morning. Uh happy to provide some general uh guidance for Q3. Um

You know for Q2 quarter, you know quarter over quarter costs were down 15 dollars, a ton versus our expectations to be up 5 dollars per time. So we're happy to to to get the cost reduction going here in this quarter.

Um, looking ahead to next quarter, we expect cost to be down another call at $20 per ton from Q2 to Q3 with even further reductions in cost in Q4.

Um, you know, Q3 costs were originally expected to be down more than $20 per ton, but some of the cost reductions were pulled forward into Q2, uh, you know, a trade-off that we're happy to take.

Speaker Change: What is it? You know as as Q2

Celso Goncalves: As it relates to the full year, we still expect costs to be down that $50 per ton in 2025 relative to 2024, and that's largely driven by the optimization of our footprint, reduction of fixed costs, reduced overhead and improved efficiencies, and a favorable cost mix as well.

Speaker Change: um,

Speaker Change: As it relates to uh, you know, the full year, we still expect costs to be down that fifty dollars per ton, uh, in 2025 relative to 2024. And that's largely driven by, you know, the optimization of our of our footprint, um reduction of fix fixed costs. Uh, reduced overhead and improved efficiencies um, in a favorable cost mix as well.

Operator 2: Celso, I appreciate that detail. My second question, I was wondering if you could remind us how we should start to think about CapEx expectations in 2027. I believe you do have a reline next year, so curious what kind of puts and takes we should have in mind, particularly some of the alterations at Middletown.

Nick Giles: Celso, I appreciate that detail. My second question, I was wondering if you could remind us how we should start to think about CapEx expectations in 2027. I believe you do have a reline next year, so curious what kind of puts and takes we should have in mind, particularly some of the alterations at Middletown.

Lourenco Goncalves: Yeah, I'll take that, Nick. Look, first of all, we don't have a reline next year. Our next reline is 2027, so there's no reline, no CAPEX related to relines in 2026. As far as Middletown, the original project that we had there was basically replacing the blast furnaces with two EMFs and a direct reduction line, and that line would be supported by hydrogen instead of natural gas. That was the end game of that project in Middletown. The very first thing, it's clear by now that we will not have availability of hydrogen, so there's no point in pursuing something that we know for sure that's not going to happen. So it's not like that project was canceled by the DOE because it was not.

Speaker Change: So, so I appreciate that detail my, my second question, I was wondering if you could remind us how we should start to think about capex expectations in 2027. I believe you do have a reline next year. So curious. Uh, what kind of puts and takes? We should have in mind, particularly some of the alterations, uh, at Middletown.

Yeah, I'll take that Nick. Um,

look up first of all, we don't have a real line next year or next to Reliance 2027. So there's no relying. No cutbacks for a related to Reliance in 2026 uh as far as middle of town. Um,

The original project that we we, we had, there was basically replacing the blast furnace with 2 EMS and the direct reduction line. And that, that line would be, uh, supported by hydrogen instead of natural gas. That was the, the end game of that project. In Middle Town, the very first thing, it's clear by now that we will not have availability of hydrogen. So there's no point in pursuing something that we know for sure that's not going to happen. So it's not like

Lourenco Goncalves: We informed the DOE that we would not be pursuing that project, what generated a very good conversation with the current DOE's current team of the Department of Energy, on revamping that project in a way that we preserve and enhance Middletown Works using beautiful coal, beautiful coke, beautiful natural gas, our American iron ore from Minnesota, keeping the flagship Middletown Works as our flagship facility, supplying automotive steels, and making our blast furnaces operate fully under AI. So that's what we have in scope right now, and we're working with the DOE, and I'm giving you as much details that I can share at this very moment.

That that project was canceled by the due because it was not, we informed the doe that would not be pursuing that project. What generator very good conversation with the current uh Doe's current team of the Departments of energy on revamping that project in a way that we preserve and enhance Middletown using beautiful Koh, beautiful Coke, beautiful natural gas. Our American our war from Minnesota, keeping the flagship Middletown works at our as our Flagship facility supplying, uh, Automotive, Steels and making our Blast Furnace operate fully under AI. So that's what we have in in in in scope right now. And we're working with the doe and I I have been, I'm giving you as much.

Speaker Change: Details that I can share at this very moment.

Operator 2: Lourenco, thank you very much. Guys, continued best of luck.

Nick Giles: Lourenco, thank you very much. Guys, continued best of luck.

Speaker Change: All right. So thank you very much. Um,

Lourenco Goncalves: Appreciate, Nick. Thanks.

Speaker Change: guys, continue best of luck.

Appreciate Nick. Thanks.

Operator 2: Our next question comes from the line of Mike Harris with Goldman Sachs. Please receive your question.

Operator: Our next question comes from the line of Mike Harris with Goldman Sachs. Please receive your question.

Mike Harris: Yeah, thank you, and good morning. Hey, just a question around free cash flow. You have expectations that EBITDA continues to improve, and you have the cost reduction well underway. So how should we think about free cash flow generation in the second half and maybe speak to expectations of that being positive and how sustainable that would be?

Speaker Change: Our next question comes from the line of Mike Harris with Goldman Sachs. Please receive your question.

Yeah, thank you and good morning. Hey just a question around. Uh, free cash flow. Uh you have expectations that IBA, do you know continues to improve and you have the cost reductions, you know, well underway. So how should we think about free cash flow generation in the uh, second half and and maybe speak to expectations of, you know, that being a positive and and and how sustainable that would be?

Celso Goncalves: Yeah, sure. Hey, Mike. It's Celso here. Starting with Q2 free cash flow, we had a cash outflow of $67 million for the quarter, and that was largely driven by a meaningful release in working capital as we reduced inventory dramatically. Going forward, we should release even more working capital in the second half of this year, and we've shown our ability to generate robust free cash flow in the past. If you look back in prior years, we've averaged over $1 billion of free cash flow each year since our transformation. So the potential for free cash flow generation is meaningful, and if we see some tailwinds and sustained support from pricing, that could accelerate pretty fast. And as we go into an environment where we're generating free cash flow, as we've been saying, we're going to use all of that to pay down debt.

Speaker Change: Yeah, sure. Hey Mike. It's also here. Um, you know

Starting with Q2 free cash flow you know, we had a cash outflow of 67 million for the quarter and that was largely driven by a meaningful release in working capital as we reduced inventory dramatically.

Speaker Change: Um, you know, going forward, we should release even more working capital in the second half of this year.

And we've shown our ability to to generate robust free cash flow in the past.

Celso Goncalves: So you could see the deleveraging happen very quickly.

Lourenco Goncalves: Yeah, let me just add Lourenco here. Let me just add a couple of things on that, Mike. Remember that we should have facilities that were eating into our ability to generate cash. Two in Pennsylvania and one in Illinois. That's behind us, so that's number one. Number two is that our model is predicated, our integrated model is predicated on volume. So more than anything, we need consistent volumes, and the volumes are going away not only through the well-established practice of importing steel into the country, but with the newly developed practice of importing cars into the country. President Trump addressed both with Section 232 Tariffs for steel and for cars. So now, importing steel is no longer a fact as it was before. Now, people would touch importing steel with a lot of care because they could get burned.

Speaker Change: Um you know, if you look back uh you know in Prior years we've averaged over a billion dollars of free cash flow each year since our transformation. Um so the the potential for free cash flow generation is is Meaningful. Um, you know, and we we see some Tailwinds and sustained support from pricing. Um, you know, that that could accelerate pretty fast. And as we go into a, a an environment where we're generating free cash flow as we've been saying you know we're going to use all of that to to pay down debt so you could see the deleveraging happen very quickly.

Yeah, let let me just that Lord answer here. Let me just add a, a couple things on that mic. Um, remember that, uh, we should delve facilities that were, uh, eating in our ability to generate cash.

Speaker Change: And, uh, 1 in Illinois, uh, that's behind us. So that's number 1. Number 2, is that our model is predicate or integrated model is predicated on volume.

Speaker Change: So more than anything we need consistent volumes, and the volumes are going away.

Speaker Change: Not only through uh, uh the the the well established practice of importing stew into the country. But with the newly developed practice of importing cars into the country,

Speaker Change: President Trump addressed boosts with Section, 232 tariffs.

Speaker Change: For steel and for cars. So now,

Speaker Change: The 1 important issue is no longer. Uh, uh, uh, ah, ah,

Lourenco Goncalves: And second, car manufacturers are finally waking up to the fact that the easiest and fastest way to produce more cars in the United States is deploying the installed capacity that's in place already. Just bring more shifts, hire more people, produce more cars. Start now. Don't just promise to build plants to produce cars in five, six years. That's not going to fly. Let's produce more cars now. We're seeing that as we speak. And we are, we, Cleveland-Cliffs, we are the only ones that have the installed capacity to promote that to happen. So it's happening already, and it will pick up steam as we go. So all these things will point to higher cash flow generation. And keep in mind, I did not mention anything regarding prices. We depend on volume.

Speaker Change: Fact as it it was before now people would touch important is still with a lot of care because uh they could get burned and second car, manufacturers are finally waking up for the fact that the easiest and fastest way to produce more cars in the United States, is deploying back the installed capacity that's in place already.

Just bring more ships, hire more people.

Speaker Change: Produce more cars. Start. Now don't just promise to build plans to produce cars in 5, 6 years, that's not going to fly.

Let's produce more cars. Now, we're seeing that as we speak and we are weak. Cleveland Cliffs. We are the only ones that have the installed capacity to, uh, promote that to happen.

So, it's happening already.

Speaker Change: And it will pick up steam as we go. So all these things will point out for uh, higher cash flow generation. And keep in mind, I did not mention anything regarding prices.

Lourenco Goncalves: We depend on reducing costs, and our cost reduction in our integrated model is predicated on having base loads and volumes going through the footprint.

Speaker Change: We depend on volume, we depend on on reducing costs and our cost reduction. In our integrated model is predicated on have base loads and volumes going through the footprint.

Mike Harris: Okay, thanks. That's a very, very good color. I appreciate that. And then just, I guess, just as a follow-up, if demand picks back up, how much can this reduce the working capital unwind?

Okay, thanks that's uh very, very good color. I appreciate that. And then just uh,

Speaker Change: I guess just as a follow-up, uh, if if, the man picks back up, uh, how much, uh, can this reduce the uh, uh working capital unwind?

Lourenco Goncalves: Do you want to take that, Celso?

Speaker Change: and I think that's also,

Celso Goncalves: Yeah, sure. I mean, I think we've sort of talked about it already. We saw a meaningful inventory reduction here in Q2, and we expect that trend to continue here into Q3 and Q4.

Yeah, sure. I mean, I think we've, we've sort of talked about it already. We saw a meaningful, uh, inventory reduction here in Q2 and and we expect that Trend to continue here into Q Q3 and Q4.

Mike Harris: Okay, perfect. Thanks, guys.

Lourenco Goncalves: Thanks, Mike.

Okay, perfect. Thanks guys.

Speaker Change: Thanks. Bye.

Operator 2: The next questions are for the line of Lawson Winder with Bank of America. Please proceed with your questions.

Operator: The next questions are for the line of Lawson Winder with Bank of America. Please proceed with your questions.

Speaker Change: The next question is from the line of laws and wonder with Bank of America. Please receive your questions.

Lawson Winder: Good morning, Lourenco and Celso. Thank you, operator. Celso, you didn't touch on the average selling price expected for Q3 2025. Could you touch on how that's shaping up, and could you also touch on the volume expectation for Q3 2025? And also, I just wanted to say nice work on the cost reduction in Q2. Thank you.

Speaker Change: Good morning Lorenzo and salso. Thank you, operator. Um, uh, salt so you didn't touch on the uh average selling price expected for uh, Q3 25. Could could you touch on how that shaping up and could you also touch on the uh, the volume expectation for uh, Q3 2525 and and also, I just wanted to say nice nice work on the cost reduction and, uh, Q2 thank you.

Celso Goncalves: Yeah, sure. Hey, Lawson. Yeah, look, just to add some more color into Q3, just generally, we expect to see continued EBITDA improvement from Q2 to Q3. I want to make that very clear. Shipments should be similar in Q3 as they were in Q2 at that 4.3 million tons level. As it relates to average selling price, I think we kind of give you guys the calculus to be able to get to that number. But just to sort of reiterate how the composition works, if you want to take all the pieces and calculate your own ASP from Q2 to Q3, you can do the math. It's about 1/3 fixed on a full-year price with resets throughout the year, and then about 20% of our volumes are under CRU month lags.

Uh, yeah, sure. Hey Lawson. Um

Yeah. Look just to add some more color into cute. Q3 um you know just generally we expect to see continued ebit time improvement from Q2 to Q3. I want to make that very clear.

Speaker Change: Um, you know, shipments should be similar uh in Q3 as they were in Q2 at that 4.3 million ton level.

Um as it relates to average selling price. I think we kind of give you guys the the calculus to be able to get to that number. But just to sort of reiterate how the

Speaker Change: The composition Works. Um, you know, if you want to take all the pieces and calculate your own ASP from Q2 to Q3, you can do the math. It's about, you know, 1/3 fixed on a full year price uh with reset throughout the year.

And then about 20% of our volumes are uh under CU month lags.

Celso Goncalves: Call it 8% is the slab agreement on a 2-month lag, 5% is CRU with a quarter lag, and about 1/3 is the remainder kind of spot. And that includes the Stelco volumes as well. So I think with that, you should get enough to calculate Q3.

Speaker Change: Uh call it. 8% is is the slab uh agreement on a 2-month lag.

Speaker Change: 5% is CR you with a quarter lag and about a third is is the remainder kind of spot uh and that includes the stealth go volumes as well. So I think with that you should get enough to

Speaker Change: Uh, to calculate Q3.

Lawson Winder: On the volumes, could you just give us an idea of how those are shaping up? Further, I just wanted to ask about the DRI as well into Q3. There was a step-up in Q2. How's that expected to move on a Q over Q basis versus Q2 into Q3? Thanks.

Celso Goncalves: Yeah, volumes in Q3 should be around the same level as Q2 at that 4.3 million ton level total. So call it flat from Q2 to Q3. DDNA stepped up due to accelerated depreciation from the idled facilities, but it should return back to, call it, Q1 levels.

Speaker Change: Yeah, volumes in Q3 should be around the same level as Q2 at that 4.3 million ton level total.

Speaker Change: Um, so call it flat from Q2 to Q3

Speaker Change: um, ddna stepped up due to accelerated depreciation from the idled facilities.

Um, but it should return back to uh call it q1 levels.

Lawson Winder: Fantastic. If I could just get your comments, just one final point on Canada. There is some concern about the economy there slowing down. I'd like to just hear your views on what you're seeing, particularly given that you're selling 100% of your volumes into Canada. I mean, are those concerns justified from what you're seeing from a steel industry point of view? Thanks. That's all from me.

Lourenco Goncalves: Lawson, look, let's clarify. We acquired Stelco, and Stelco is the Steel Company of Canada in November of 2024. So the name is Steel Company of Canada. So it was not supposed to be the steel company that disrupts the domestic market in the Great Lakes of the United States. So that was the main reason why I bought Stelco, because I believe in Canada. The problem is that apparently, the Canadians, particularly the Canadian politicians, they don't believe in Canada. They believe that Canada needs to be part of Europe. They're not. They believe that Canada depends on the United States. They don't. So they need to wake up and stop being lazy in terms of thinking their country as a satellite of Europe and the United States. Then they attract bad things said to them because it's their own making.

Lawson: Fantastic. If I could just get your comments. There's 1 final point on uh, Canada. And uh, there is some concern about the economy there slowing down. I'd like to just hear your views views on what you're seeing particularly given that you're selling a 100% of your volumes indicated Canada. I mean, are those are those concerns Justified from what you're seeing from a from a steel industry point of view? Thanks, that's all for me. Uh Lawson look, let's clarify, we acquired

Steelco.

Lawson: And steel with the steel company of Canada.

And and, and in November of 2024,

Lawson: So the name is steel company of Canada.

So it was not supposed to be the steel companies that disrupts the domestic Market in the the Great Lakes of the United States.

So that was the main reason why I bought sto because I believe in Canada. The problem is that apparently the Canadians

Lawson: Particularly Canadian politicians. They don't believe in Canada, they believe that Canada needs to be part of Europe. They're not

They believe that Canada depends on the United States.

They don't.

Lawson: So, they need to wake up and stop being lazy.

Lawson: in terms of thinking their country as a satellite of Europe and the United States

Then they attract bad things said to them.

Lourenco Goncalves: They need to grow a pair and understand that Canada is a very good country with a lot of potential, with a lot of critical minerals, with a lot of things that can make it a powerhouse. The very first thing they need to tell foreigners, "Get out of my market." Why they have to lock in the import levels of 2024 that basically killed the Canadian steel industry because they can't sell in Canada? At the very moment that Section 232 hit, we, out of Stelco, started selling as far as British Columbia because the ones in the Western Canada market realized they could no longer rely on Asians to supply steel to them. But then they went back because, and it's not like just the liberals, the conservatives are doing a horrible job too. So long story short, Canada can fix themselves.

Lawson: Because it's their own making.

Lawson: They need to grow a pear.

Lawson: And understand that Canada is a very good country with a lot of potential with a lot of critical minerals with a lot of things that can make it a Powerhouse. The very first thing they need to tell foreigners. Get out of my market. Why they have to lock in the import levels of 2024 that basically killed it. The Canadian is still industry.

Because they can't sell in Canada.

Lawson: Very moment that section 232.

Lawson: Hit.

We out of stock, we started selling as far as Bridge Columbia.

Lawson: Because the ones in the western Canada Market will realize that could no longer rely on Asians to supply still to them.

But then they went back because and it's not like, just the Liberals, the conservatives are doing a horrible job too.

Lourenco Goncalves: They import an amount of steel into Canada that's pre-equivalent to the size of the Canadian market. If they stop that, we are done. They are self-sufficient, and we are able to supply that market. We proved that. The difference between me and the rest is that I have very little patience to keep repeating the same thing time and time and time and time again. I have repeated enough. They know my opinion. By the way, Cleveland-Cliffs through Stelco in Canada has a much bigger influence than Cleveland-Cliffs in the United States, and we have a lot of influence here. So you should expect good things because I believe there are some politicians in Canada within the government that are waking up and seeing light. And I have a lot of hope in my friends, cabinet members of the Carney government. Let's see how Prime Minister Carney will react.

Lawson: So long story short Canada can fix themselves.

The important amount of Steel into Canada, that's pretty equivalent to the size of the Canadian Market.

Lawson: If they stop that we are we are we are we are done, they are self-sufficient.

Lawson: And we are able to supply that market. We prove it that

Lawson: the the difference between me and the rest is that I have very little patience to keep repeating the same thing, Time and Time and Time and Time Again.

Lawson: I have repeated enough, the normal opinion, by the way, Cleveland Cliffs, through stelco in Canada, has a much bigger influence than Cleveland cliffs in the United States. And we have a lot of influence here.

So, you should expect good things because I believe there are some politicians in Canada within the government that are waking up.

Lourenco Goncalves: He's not a central banker anymore. I don't like central bankers, but now he's a prime minister. So time to step up and do what's necessary for Canada. That's what I expect there. I don't know if I answered your question properly, Lawson. Are you okay with that?

Lawson: And seeing light and I have a lot of Hope in my friends cabinet members of the County government. Let's see. How prime minister Carney will react. He's not a a central Banker anymore. I don't like Central Bankers but now he's a prime minister. So time to step up and do what's necessary for Canada, that's what I expect there.

Lawson Winder: That was fantastic. Thank you so much, Roberto. And Celso, thank you.

I, I don't know if I want to answer your question properly. Also, are you okay with that?

Lourenco Goncalves: Thank you.

Celso Goncalves: Thanks, Lawson.

Lawson: That was fantastic. Thank you so much. It's also thank you.

Lawson: Thank you. Thanks Lawson.

Operator 2: The next questions are for the line of Phil Gibbs with KeyBanc Capital Markets. Please receive your questions.

Operator: The next questions are for the line of Phil Gibbs with KeyBanc Capital Markets. Please receive your questions.

Lourenco Goncalves: Hey, good morning.

Phil Gibbs: Hey, good morning.

The next question is from the line of Phil Gibbs with keybanc capital markets, please receive with your questions.

Phil Gibbs: Good morning, Phil.

Lourenco Goncalves: Good morning, Phil.

Phil Gibbs: Hey, good morning.

Celso Goncalves: Lourenco, can you talk a little bit about automotive volumes in the second quarter and how they developed relative to maybe Q1 or the late stages of 2024 where I know the volumes were under pressure?

Phil Gibbs: Lourenco, can you talk a little bit about automotive volumes in the second quarter and how they developed relative to maybe Q1 or the late stages of 2024 where I know the volumes were under pressure?

Lawson: Good morning. Phil

Phil Gibbs: Lorenzo can you talk a little bit about Automotive volumes in the second quarter and and how they developed relative to maybe q1 or the late stages of 2024? Where I I know the the volumes were under pressure

Lourenco Goncalves: Actually, Phil, it's the opposite. The volumes are growing. We are seeing all the OEMs producing more cars, announcing more moves into the US, stopping importing steel from Asia to feed their plants in Mexico while they are moving the plants from Mexico to the United States. But in the meantime, instead of buying steel from Asia, they are buying steel from the United States. We started to supply Mexico from the United States with the promise that we are going to supply them here as they grow the production of some models in the United States. We are seeing several announcements of models that used to be built in other places being moved back to the United States.

Phil Gibbs: The volumes are growing.

Lourenco Goncalves: The biggest example is one of the OEMs used to produce entire cars in South Korea and import them to the United States, and now they have already discontinued the practice, and they will start producing the model here in the United States. So as we move into the second half, things will be more visible. Next year will be even more visible. It takes time, but it's already happening, and the numbers will start to show.

Moves into, uh, the US, uh, stopping importing stew, uh, from Asia to feed the plants in Mexico, while they are moving the plants from Mexico to the United States. But in the meantime, uh, is still from Asia. They are buying steal from the United States. We start to supply Mexico from the United States, uh, with the promise that we are going to supply then here as they grow. Uh, the production of some models in the United States. We are seeing several announcements of models that used to be, uh, built in in, in other places, being moved back to the United States. The biggest example, is 1 of the oems used to produce entire cars in South Korea and

important to the United States. And now they have already discontinued the practice and they will start producing the model here in the United States. So, as we move into second half, things will be more visible. Next year, will be even more visible. It takes time, but it's already happening and the numbers will start to show.

Celso Goncalves: Thanks, Lourenco. I meant last year they were under pressure. I meant the recovery happening now. Just curious on the level and in terms of how much more you guys can think you can grow that mix looking ahead.

Phil Gibbs: Thanks, Lourenco. I meant last year they were under pressure. I meant the recovery happening now. Just curious on the level and in terms of how much more you guys can think you can grow that mix looking ahead.

Phil Gibbs: Thanks Lorenzo. I I I meant last year they were under under pressure, I meant

Phil Gibbs: The recovery happening now. Just curious.

Lourenco Goncalves: We can grow a lot. I will not give you a number, first because I don't have it, and I don't want to give you an inaccurate number, but second because it all depends on how fast these folks will start producing cars. We are seeing even some OEMs that don't really produce a lot of cars here in the United States plan to produce the totality of what they sell in this market in the United States. So I think this will be one of the biggest accomplishments of the Trump administration when we look back in then three or four years into the future. It will be the resurgence of automotive production in the United States. And of course, Cleveland-Cliffs is the only one that's really equipped to support this growth as we speak. Of course, everybody can build as many plants as they want.

Phil Gibbs: On the on the level in, in terms of how much more you, you guys can think you can can grow that mix looking ahead.

Phil Gibbs: We can grow a lot. I I, I will not give you a number first, because I don't have it and I don't want to give an accurate inaccurate number, but second because it all depends on how fast these folks will start producing cars. We are see even at some, uh, uh, oems that don't really produce a lot of cars here in the United States plan to produce the totality of what they sell in this market in the United States. So, I think this will be 1 of the biggest accomplishments of the Trump Administration. When we look back,

Lourenco Goncalves: It's so easy to build, as you know, to build a blast furnace and a BOF in this country and so fast. So we should expect that to happen in the next 24 hours. But in the meantime, we are done. We have it. We have the facilities. We have the finishing capabilities. We have all the slabs properly approved with the OEMs. So one of our competitors will now have his slabs approved very soon, as you know. Can't wait to get rid of that slab contract. That was the last thing that I negotiated when I acquired the assets of ArcelorMittal USA. I'm glad I did for only five years. So in the five years, I'm coming to an end 9 December 2025, at 11:59PM. I think I gave you as much color and volume as I could at this point, Phil.

In and then 4, 3 or 4 years into the future, it will be the Resurgence of Automotive production in the United States. And of course, Cleveland Cliffs is the only 1 that's really equipped to support this growth as we speak. Of course, everybody can build as many plants as they want. It's so easy to build as, you know, to build a blast furnace and a BF in this country and so fast. So uh, we should expect that to happen in the next 24 hours.

But in the meantime, we are done, we have it, we have the facilities, we have the finishing capabilities. We have all these labs,

Properly, uh, approved with the oems. So, 1 of our competitors do not have his Labs approved very soon, as you know, uh, can't wait to get rid of that thread contract. That was the last thing that I negotiated, when I acquired the assets of arsalan, middle USA. Um, I'm glad I did for only 5 years

so, in the 5 years, I come to an end, December 9th, uh, 2025 at 11:59 p.m.

Celso Goncalves: Thanks, Lourenco. A follow-up for Celso. How much are your overall businesses on CRU quarterly? I think I got the rest of the calculations you provided. Thanks.

Nick Giles: Thanks, Lourenco. A follow-up for Celso. How much are your overall businesses on CRU quarterly? I think I got the rest of the calculations you provided. Thanks.

Speaker Change: I think I gave you as much caller on volume as I could at this point. You

Speaker Change: Thanks Lauren. So, I'd follow up for, uh, for salso. Um,

How much of your your overall business is on uh CU quarterly. I think I got the the rest of the the calculations you provided. Thanks.

Phil Gibbs: Yeah, no problem, Phil. It's 5% CRU quarter lag.

Lauren: Uh yeah no problem. Phil, it's 5% crau quarter lag.

Lourenco Goncalves: Thank you.

Thank you.

Celso Goncalves: No problem. No cabs.

Operator 2: The next questions are for the line of Martin Englert with Seaport Research Partners. Please receive your questions.

Operator: The next questions are for the line of Martin Englert with Seaport Research Partners. Please receive your questions.

Lauren: No problem, no caps.

Martin Englert: Well, good morning, everyone. Appreciate the time. On the coke contracts, the June contract that ended was with Haverhill II for 550,000 tons, and then it is the December-ending contract with Haverhill I for 400. Is that correct?

Next question is from the line of Martin angler with C Port research Partners. Please, just see with your questions.

Lourenco Goncalves: Yes, that's correct, Martin.

Hello, good morning everyone. I appreciate the time, uh, on the coke contracts. The June contract that ended was with habel 2 for 550,000 tons and then is the December ending contract was ever a 1 for 400. Is that correct?

Martin Englert: Do you have roughly around a $70 per ton benefit when you produce internal coke versus having to buy external on contract, or do you have any goalposts for a range on what that benefit looks like?

Yes, that's correct. Marty

Lourenco Goncalves: No, it's bigger than that. It's actually north of $100.

Speaker Change: Do you have roughly like a 70 per ton benefit when you produce internal Coke versus having to buy external on contract? Or do you have any gold posts for a range on what that benefit looks like? No, it's bigger than that.

Martin Englert: Okay. Appreciate it. One quick follow-up. You mentioned winning some business in autos in Mexico for contracts. Are you seeing anything in the appliance market outside of the United States because of downstream 232 duties, meaning if they use US steel, then they don't get hit with a duty when importing the appliance?

Exactly north of a 100 bucks.

Speaker Change: Okay, appreciate it 1, quick follow-up, are you seeing you mentioned winning some business and auto Autos in Mexico for contracts.

Lourenco Goncalves: Yeah, it's a different dynamics in the two of them. What I was talking about in Mexico is that some facilities in Mexico were designed to be the dumping ground of transshipment from places like Korea, Japan, and others. So that practice is no longer acceptable. So the steel suppliers that used to be the suppliers for these facilities in Mexico are now buying in the United States. And that's where we are seeing opportunities in Mexico. We are not super excited about it because this is a temporary thing. Don't forget, these plants are not supposed to be in Mexico. They're supposed to be in the United States. But for now, it's better to sell there instead of allowing steel from Japan to land in Mexico, and then the part comes to the United States to unfairly compete with our markets.

Seeing anything in the appliance Market outside of the United States because of Downstream 232 duties. Meaning, if they use us steel, then they don't get hit with the duty. When importing the appliance

Yeah. It it's a different dynamic in the 2 of them, what I was talking about Mexico is that uh, some uh, uh, facilities in Mexico, were designed to be The Dumping Ground of transshipment from uh places like uh, Korea and Japan and others. So that practice is no longer acceptable. So these 2 suppliers that used to be the supplier for this facility in Mexico. Are now buying in the United States.

Lourenco Goncalves: So that was not the spirit of the USMCA, and we are just bringing back what was on paper, and people, through pushing the envelope, started toeing the line and then crossed the line. So we are fixing that. That's the dynamics with Mexico and the United States. As far as appliances, actually, we were able to include appliances in Section 232 as well. And that did for appliances exactly what it's doing for automotive. So the big ones are starting to produce appliances in the United States again. And that's also coherent with the goals that President Trump put in place, and he is following to what he said he would do. So we are seeing more appliance production in the United States. We will see more appliances production in the United States, and that will be good not just for Cliffs.

Speaker Change: And uh, that that's where we are seeing opportunity in Mexico. We are not super excited about because this is a temporary thing. Don't forget. Uh, these plants are not supposed to be in, Mexico, supposed to be in the United States, but for now it's better to sell their instead of allowing uh, still from Japan to land in Mexico. And then the part comes to the United States to to, to unfairly compete with our markets. So that was not the spirit of the usmca. And, uh, we are just bringing back. What was in in, in, in paper and, uh, and uh, uh, people by, uh, to pushing the envelope, it started. Uh, uh, Towing the line and then cross the line. So we are fixing that. That that's the, the D.

Speaker Change: Dynamics with New Mexico in the United States. As far as appliances actually, you were able to include appliances in section 232 as well. And, uh, that, uh, did for appliances exactly what is doing for automotive. So they are the big ones are starting to produce appliances in the United States again.

Lourenco Goncalves: It will be good for everybody that produces steel here in the United States.

Martin Englert: So broadly speaking, it sounds like when you think about the total market size of fixed annual contracts, that there'll be a bigger market to participate in looking forward in the coming quarters, in the coming year with some of that coming back and also winning business south of the border, correct?

And that's also a coherent with the goals that President Trump put in place and he is following to what he said he would do. So we are seeing more Appliance production in the United States. We will see more appliances production in the United States and that will be good, not just for Cliffs. It will be good for everybody that produces steel here in the United States.

Speaker Change: so broadly speaking, it sounds like when you think about the total Market size of 6, annual contracts, that there will be

Lourenco Goncalves: Yeah, absolutely. That's a fair statement. It's a fair conclusion.

Speaker Change: A bigger Market to participate in looking forward in the coming, quarters in the coming year, with some of that coming back and also winning business out of the Border. Correct?

Martin Englert: Okay. Any considerations when we think about winning more auto market share in fixed contracts in Mexico on mix or that structure there with the contracts or roughly comparable to what you participate in in the United States?

Speaker Change: Yeah, absolutely. That's a fair statement. That a fair conclusion.

Speaker Change: Any considerations when we think about winning more auto market, share, and fixed contracts in Mexico.

Lourenco Goncalves: Very comparable. Very comparable. And the only big difference at this point is freight. But freight is negotiable, and each case is a different case, and we are negotiating accordingly.

On mix or that structure there with the contracts or roughly comparable to what you participate in in the United States.

Speaker Change: Very comparable, very comparable.

Martin Englert: Okay. Appreciate it. Congratulations on the cost performance in the quarter. Thank you.

And uh the only big difference with the at this point is Freight but Freight is negotiable and uh each case is a different case and we are negotiating accordingly.

Lourenco Goncalves: Thank you, Martin. Appreciate the questions and good luck at Seaport now that we are assuming the bid.

Speaker Change: Okay, appreciate it and congratulations on the cost performance in the quarter. Thank you.

Martin Englert: Thank you.

Thank you, Martin. Appreciate, uh, the the the questions and good luck at support. And uh, know that you are assuming the beat

Speaker Change: Thank you.

Operator 2: Our next question is from the line of Alex Hacking with Citi. Please receive your questions.

Operator: Our next question is from the line of Alex Hacking with Citi. Please receive your questions.

Speaker Change: Our next question is from the line of Alex hacking with City. Please receive your questions.

Celso Goncalves: Yeah, good morning. I just have one question. Lourenco, in your comments, you mentioned that foreign investment in Cliffs could be an attractive opportunity. There's a lot of potential range in foreign investment, right, from minority stakes and assets to buying the whole company. Could you maybe give more color on what kind of transactions that you would potentially explore? Thank you.

Alex Hacking: Yeah, good morning. I just have one question. Lourenco, in your comments, you mentioned that foreign investment in Cliffs could be an attractive opportunity. There's a lot of potential range in foreign investment, right, from minority stakes and assets to buying the whole company. Could you maybe give more color on what kind of transactions that you would potentially explore? Thank you.

Alex: Yeah good good morning. I just have 1 question. Um Lorenzo and your comments, you mentioned that foreign investment in Cliffs could be an attractive opportunity.

Alex: Uh there's a lot of potential range in in investing foreign investment right? From Minority stakes and assets to buying the whole company.

Lourenco Goncalves: Yeah, look, we are an asset-rich company, and we believe that we are so undervalued at this point that the sum of the parts is a lot more valuable than the company as it trades in the stock exchange. So we are open, and we are at this point in active conversations on a number of non-core assets that could be generating $ billions in cash inflow that will be used to pay down debt. Everything else is possible, including carve-outs in our footprint, and then I'm talking about core assets. But of course, I'm not going to speculate. But we are entertaining a lot of inbound interest from different credible potential suitors for endeavors that we might or might not take going forward.

Alex: Could you maybe give more color on what kind of transactions that you would potentially explore. Thank you.

Yeah, look, uh, we are an asset rich company.

Alex: and uh, we uh

Alex: Believe that we are so undervalued that this point that the sum of the parts is a lot more valuable than the company as it trades in the stock exchange. Um, so we are open and we are at this point uh, in active, uh, conversations on a number of uh, non-core assets. That could be uh, generating billions of dollars in in

Alex: cash inflow that will be used to pay down that

everything else is possible.

Different, uh, credible potential, uh, Suitor for Endeavors that we might or might not take going forward.

Celso Goncalves: Okay. Thanks, Lycaller. Thanks a lot.

Alex Hacking: Okay. Thanks, Lycaller. Thanks a lot.

Lourenco Goncalves: Thank you.

Speaker Change: Okay, thanks licar. That's a lot.

Alex: Thank you.

Operator 2: The next question is from the line of Carlos de Alba with Morgan Stanley. Please receive your question.

Operator: The next question is from the line of Carlos de Alba with Morgan Stanley. Please receive your question.

Carlos de Alba: Yeah, thank you. Good morning, Celso, Lourenco. On the cost guidance, sorry, on the cost performance in the quarter, obviously, it was much better than expected. Yet the guidance for the year remained at $50 year-on-year decline. Is this a conservative outlook, and could you potentially perform better than the $50 decline just in line of what you did in the quarter?

Next question is from the line of Carlos Alba with Morgan Stanley. Please see you with your question.

Yeah, thank you. Uh, good morning. So, um, on on the calls, guidance. Uh, sorry, the cost performance in the quarter, obviously was better than much better than expected. Um, get the guidance for the year remain at $50, uh, year and year decline. Um, is, there is this a conservative, uh, Outlook and and, and you could, you potentially, perhaps uh, uh, potentially perform better uh, than than the $50 decline just in line of what you did in the quarter.

Phil Gibbs: Yeah, hey, Carlos. It's Celso. Yeah, look, we wanted to be conservative. And as I stated earlier, we were able to deliver a quarter-over-quarter cost reduction when we initially had an expectation to go up. So some of that has been pulled forward. So that's why we're keeping the same guidance for the full year. But I think your point is a fair point. I think there are opportunities for us to exceed our own expectations. Things like scrap and pig iron tariffs are going to have an impact on the market. We have the coal and coke opportunities that we talked about. We're running our mills more full, more efficiently. So all those things could provide tailwinds beyond what we've guided. But we wanted to be conservative and kept the overall guidance for the year flat.

Yeah. Hey Carlos. It's also um, yeah, you know look we wanted to be conservative. Um, and as I stated earlier, you know, we we were able to deliver a quarter of a quarter cost reduction when we initially had an expectation to go up. So some of that has been pulled forward. Um, so that's why we're keeping the same guidance for the full year. But I think they're, your point is a fair point. I think there are opportunities for us to exceed our own expectations. Um, you know, things like scrap and uh,

Carlos de Alba: Fair enough. And then what happened at the end with Dearborn and Cleveland-Cliffs number six? Can you confirm that Dearborn was idle? Any updates there would be great.

The Big Iron tariffs are going to have an impact on the market. Uh, we have the coal and Coke opportunities that we talked about. Um, you know, we're running our Mills more full more efficiently. So all those things could uh could provide Tailwind, you know, beyond what we've guided. Um, but we wanted to be conservative and kept the, the overall guidance for the year flat.

Alex: Yeah, fair enough. And then um,

Lourenco Goncalves: Yeah, Cleveland-6 is up and running, and Dearborn is going down. So we're replacing one with the other. That's pretty much it. I'm not sure if I understood your question.

Can you like what happened at the end with Dearborn and, and Cleveland and claves. Number 6, can you confirm that? The urban was, uh, was idle, um, you know, any updates there will be great

Alex: Yeah, uh, Cleveland Cleveland Cleveland 6, uh, is up and running and yeah, boy is going down. So, we're replacing 1 with the other.

Carlos de Alba: No, I just wanted to confirm that, Lourenco. So very clear. And then if I may, finally, can you provide any further color on the non-core assets that potentially you could sell?

That's pretty much it that that there's no change. I'm I'm not sure if I understood your your

Lourenco Goncalves: Yeah, they are black. Some are blue. Some are yellow. That's the color I can give to you.

Just wanted to confirm that learning. So, so very, very clear and then if I met, uh, finally, um, can you provide any any for the color on, on, on the non-core assets that potentially, you could, uh, you could tell

Speaker Change: Yeah, they are black.

Carlos de Alba: All right. Thank you very much.

Speaker Change: So my blue, some of yellow. That's the color I can give to you.

Lourenco Goncalves: You're welcome.

Operator 2: Thank you. At this time, I'll turn the floor back to management for closing remarks.

Operator: Thank you. At this time, I'll turn the floor back to management for closing remarks.

Speaker Change: Thank you very much. You're welcome.

Thank you at this time. I'll turn the floor back to management for closing remarks.

Lourenco Goncalves: Thank you, everyone. I appreciate talking to you. Have a good day.

Speaker Change: Thank you, everyone.

Speaker Change: I appreciate talking to you have a good day.

Operator 2: This will conclude today's conference. Let me disconnect your lines at this time. Thank you for your participation. Have a wonderful day.

Operator: This will conclude today's conference. Let me disconnect your lines at this time. Thank you for your participation. Have a wonderful day.

Speaker Change: This will conclude today's conference. May disconnect your lines at this time. Thank you for your participation. Have a wonderful day.

Q2 2025 Cleveland-Cliffs Inc Earnings Call

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